[Repost from March 19, 2006]Have the bank-owned credit card associations gotten into the cartoon business? The popular “Where’s Waldo” books are a search-and-find photo scavenger hunt designed as a thinking game for educators to develop exercises for children to learn. In each case, Waldo is hidden in the background and the challenge is to identify where he is.The same activity occurs when a consumer presents a Debit, ATM or Check Card to merchants. In what is becoming a more frequent exercise, retailers are finding it more challenging than ever to identify, not Waldo, but the “debit” or other PIN identification to differenciate the various cards. Why is this so important? Visa and MasterCard’s revenues are enhanced when retailers are tricked into accepting the cards which instantly deduct funds from a bank account and forced to pay higher interchange fees.

When a non-credit card is transacted, the rates are significantly lower. Most merchants we have talked with are unaware of the differences in fees and their sales clerks are too busy to play the banks version of the “Where’s Waldo” game. Often, the word “debit” is hidden within the hologramor colored to match the background. An examination of the card requires more than a glance, but the result for running the payment at the much higher credit card rate is a costly oversight.

Visa U.S.A. announced recently that it will disclose its operating regulations to both merchants and U.S. Senators, effective Sept. 1. But there’s a hitch: Merchants will be subject to nondisclosure agreements (NDAs). Visa stated it will make the regulations available “to important stakeholders in the Visa system” as a step toward transparency. “While Visa’s merchant rules guide has been available for over a decade, and it is among the most viewed documents on our Web site, some merchants have asked us to provide even more detail,” the Association said in a statement.

“We are responding to this request by sharing Visa’s operating regulations with those qualifying merchants and third-party agents who participate in the Visa system. The operating regulations will be available beginning September 1, 2006, and will be provided under a nondisclosure agreement to protect confidentiality.” At a hearing July 19 before the Senate Judiciary Committee on interchange fees (“Summer heat wave sweeps Senate Judiciary interchange hearing” in this issue), a Visa representative agreed to provide the committee with a copy of its operating regulations. Visa will do so by the end of August, the Association told The Green Sheet. It was not able to say by press time whether Senators will be subject to an NDA. “Sen. [Arlen] Specter, [R-Pa.] was direct about it, that they should be made available, and not under an NDA,” W. Stephen Cannon said in an interview. Cannon testified on behalf of the Merchants Payments Coalition. “The Senator said he’d provide them to me to clear up any discrepancy of what the rules did or didn’t say.”

Visa said it expects the rules disclosure to demonstrate the complexity of the industry and the lengths to which Visa has gone to balance the interests of members, merchants and consumers. “In sharing them, our goal is to provide partners with the information they are interested in, without sacrificing Visa’s intellectual property or the security of the system,” Visa stated.

Other recent steps toward openness Visa has taken include the publication of its annual report and the appointment of independent directors to its board. “We are now taking transparency one step further,” Visa stated.

If you have traveled to Las Vegas recently, the latest spin on slot machines is the electronic valuation button. Rather than playing at a quarter or dollar machine, casinos make it easier and faster to pocket your money. There are fewer coin-operated machines; most just accept paper currency. And, they have this new feature – you choose the machine’s valuation for each spin. From 25-cents, to $1, $2, $5. It is your choice – don’t forget to always play the full value. This certainly is no small change, especially if you are accustomed to leisurely playing the quarter machines. Get a few lucky jackpots and you feel compelled to instantly change the currency to a richer denomination.

The difference between a casino and Visa® or MasterCard® is that at least you know what you are playing in Vegas. The rates keep changing, but you are in control. When consumers use their debit and credit cards at a store, doctor’s office or anywhere that cards are accepted – because there are nearly one-hundred differing interchange fees – it is anyone’s guess what the actual fee will be. And, that is just how the credit card associations like it. As a retailer and ecommerce business-owner, we have no clue what the individual merchant interchange fees are. But, like millions of other merchants, we too know it is no small change. Each year the banks reap billions (~$25-billion last year) from these fees which they control by agreement and stand accused by us of illegally fixing the prices on. [Commentary: WayTooHigh.com]

Today a customer pulled out an ATM card and then switched it for a credit card, but not before we noticed that they used a sharpie to mark “ATM” and Credit” on each card. Why?Because, they could not identify the difference between the two cards. If cardholders are confused, think of the harried sales clerk who needs to identify with lightening-fast accuracy whether to perform a credit or debit transaction. Read this recent posting to understand the depths to which Visa® and MasterCard Worldwide® go to process cards at the much higher percent -of-sale credit card merchant interchange rate.

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WayTooHigh.com: The Credit Card Interchange Report, is edited by Mitch Goldstone, co-founder of California-based ScanMyPhotos.com, the international online photo preservation service.
Goldstone and co-owner, Carl Berman are also the lead plaintiffs and class representatives in a antitrust class-action litigation against Visa, MasterCard and major banks that was filed in 2005.
This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked. (c) 2010